On the decline in S&P Global’s Malaysia Manufacturing Purchasing Managers’ Index (PMI) to 48.4 last month from 49.5 in February, it said this was largely due to subdued demand conditions both in the domestic and international markets.
“We reiterate our outlook that domestic manufacturing conditions, especially in the export-oriented sector, will continue recovering in the coming months, especially in H2 2024, backed mainly by technology upcycle and China’s gradual economic recovery following an expected significant stimulus injection from its government,” it said in a note today.
The investment bank said growth is also expected to be bolstered by the continued expansion among regional peers and stronger-than-expected demand from advanced economies, driven by resilient domestic demand.
In a statement yesterday, S&P Global announced that the seasonally adjusted Malaysia Manufacturing PMI eased to 48.4 in March from 49.5 in the previous month, signalling a slight moderation in the health of the sector.
Meanwhile, Public Investment Bank Bhd (PIVB) said that in the near term, Malaysia’s PMI is likely to mirror global trends, suggesting a level above the critical expansion threshold of 50 points.
It said the global semiconductor market is forecast to see a robust recovery of 13.1% in 2024 compared to the earlier projection of 11.8%, auguring a pivotal juncture for Malaysia’s manufacturing sector and the semiconductor industry worldwide.
“The anticipated upswing is particularly promising for major electrical and electronics (E&E) exporters like Malaysia, given that exports of E&E products constitute over 40% of the nation’s total gross exports.
“Furthermore, the finance ministry anticipates a substantial 5.5% increase in manufactured goods exports for 2024, further underpinning the optimistic sentiment,” it said in a separate note.
However, both Kenanga Investment and PIVB expressed concerns over downside risks that include escalating geopolitical tensions in the Middle East and Eastern Europe, and a possible renewed US-China tensions, which could potentially disrupt global supply chains, elevate business costs and lead to a prolonged slowdown in global trade.
“Despite these risks, an anticipated uptick in electronics exports and favourable base effects could partially offset negative impacts. As such, we forecast Malaysia’s exports of goods and services to rebound with a growth rate of 5.4% in 2024,” said PIVB.
Kenanga Investment opined that Malaysia could conversely benefit from trade diversion, thanks to a significant rise in approved manufacturing sector investments recorded last year which reached RM152 billion from RM84.3 billion in 2022.
“Therefore, we keep the 2024 gross domestic product forecast of 4.5% to 5%, aligning with Bank Negara Malaysia’s and the finance ministry’s projections of 4% to 5%,” it said.